Berkshire requires a 25–50% discount to intrinsic value before buying.
Buffett Quality Checklist
✗ROE >15% consistently (≥7 of last 10 years)
✓Free cash flow positive (≥8 of last 10 years)
✓Conservative leverage — Debt/Equity below 1
✓Revenue growing at CAGR >5%
✓EPS growing at CAGR >5%
10-Year Financial History — SEC EDGAR 10-K Filings
Year▲
Revenue▲
Net Income▲
FCF▲
Owner Earnings▲
ROE▲
Net Margin▲
LT Debt▲
Cash▲
2016
$1.2B
$99.3M
$137.9M
$93.3M
12.7%
8.6%
—
$362.0M
2017
$1.5B
$72.8M
$163.0M
$71.5M
7.5%
5.0%
—
$582.6M
2018
$1.8B
$240.3M
$254.6M
$239.3M
19.0%
13.0%
—
$770.6M
2019
$2.3B
$261.1M
$188.1M
$207.1M
16.4%
11.4%
—
$936.6M
2020
$2.7B
$327.2M
$475.6M
$321.2M
16.5%
12.3%
$25.0M
$1.3B
2021
$3.8B
$481.7M
$460.8M
$453.5M
19.4%
12.8%
$30.2M
$1.4B
2022
$4.8B
$419.4M
$382.5M
$430.1M
14.0%
8.7%
$27.7M
$1.7B
2023
$4.7B
$417.1M
$534.2M
$480.5M
12.0%
8.9%
$26.1M
$2.0B
2024
$4.7B
$454.5M
$527.0M
$511.9M
12.5%
9.6%
$25.2M
$1.3B
2025
$5.5B
$377.7M
$612.7M
$460.2M
10.3%
6.9%
$25.0M
$1.3B
Warren & Charlie
Buffett / Munger — quality, moat & valuation
EPAM Systems, Inc. (EPAM) — Investment Memo
🐂 The Bull Case (Warren's voice)
The "Digital Plumber" Moat: EPAM doesn't just write code; they rewrite the central nervous system of global enterprises. Once they are embedded in a bank's core ledger or a healthcare provider's patient data flow, the cost of replacement is not just financial—it is operational suicide.
Cash is King: The earnings quality is pristine. FCF of $0.6B exceeding Net Income of $0.4B tells me the profits are real, not accounting gymnastics. They have a lean asset base; their "factories" are human brains.
The Outsourcing Secular Tailwind: Large corporations will never stop outsourcing complex engineering to those who can do it faster and better. EPAM is the "gold standard" for high-end delivery.
Attractive Entry: At a price significantly below $143.14, we are buying a high-quality cash generator at a discount to its present value of future flows.
🐻 The Bear Case (Charlie inverts)
“Show me where I'll die and I won't go there.”
The AI Guillotine: EPAM sells "brainpower by the hour." Generative AI doesn't just assist the coder; it replaces the billable hour. If AI can automate 40% of the complex coding that EPAM currently charges a premium for, the business model doesn't just shrink—it collapses structurally.
The ROE Death Spiral: ROE plummeting from 19.4% to 10.3% is a screaming red flag. Management is deploying capital into a business that is becoming less efficient. They are fighting a losing battle against diminishing returns.
Empire Building: The aggressive acquisition spree is a classic sign of management trying to "buy" growth because organic growth is stalling. Adding more mediocre assets to a declining core is a recipe for value destruction.
The Verdict on Risk: The AI threat is the primary killer. Timeframe: 3–5 years for full structural impairment of the hourly billing model.
💰 Valuation & Margin of Safety
Reacting to the DCF of $143.14 (8% FCF growth, 10% discount):
Intrinsic value estimate: $143.14 per share
25% margin of safety entry: $107.36(conservative)
50% margin of safety entry: $71.57(Buffett's ideal)
Current Status: Fair to Expensive. Unless the market price drops significantly below $110, the current valuation does not sufficiently compensate us for the structural risks of AI and the deteriorating ROE.
Verdict: PASS
The business is a high-quality utility, but the engine is losing compression. The combination of an AI-driven structural threat and a dismal trend in ROE makes this a "value trap" at current levels. We do not buy businesses where the moat is being eroded by a technological shift and management is attempting to mask it with acquisitions.
Research Notes· Money Model · Moat · Financials · Management
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.